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Data: New York Fed; Chart: Axios Visuals

The New York Fed's latest survey of consumers shows that average Americans are joining investors in boosting their expectations for inflation, with consumers' one-year inflation expectations rising to the highest level since July 2014.

Why it matters: Inflation is largely controlled by inflation expectations. If individuals expect costs to rise they will generally demand higher pay, landlords will raise rents and businesses will increase the cost of goods and services, pushing inflation higher.

Flashback: Fed chair Jerome Powell last week said he didn't expect prices to increase to the point “where they would move inflation expectations materially above 2%.”

  • But the data show consumers clearly see inflation rising materially above 2% over both a one-year and three-year time horizon (the survey found consumers' three-year inflation expectations were 3%, unchanged from January).
  • Investors also expect inflation to move well above 2%, as evidenced by the levels of 5-year, 10-year and 30-year breakeven inflation rates all currently above 2%.

Details: The biggest factors in the increased inflation expectations were median expectations for rent and gas prices, which jumped to 9% for the cost of rent from 6.4% in January and to 9.6% for gas from 6.2% the previous month.

Don't sleep: “To be sure, if bond yields continue to rise and there is a smooth rotation out of growth and defensive stocks into value and cyclical stocks, the Fed will remain sanguine,” Société Générale strategist Albert Edwards told clients in a note last month.

  • “But the risk is growing that with so many bubbles blown by the Fed something will burst soon.”
Consumers' expectations for jobs and their finances are in a rut
Data: New York Fed; Chart: Axios Visuals

U.S. consumers are not expecting much growth in their own household income — expectations decreased from January and are below their February 2020 level, the New York Fed's survey also shows.

What happened: Expectations for household income growth declined for the first time since October last month, showing a renewed lack of confidence.

  • The number is well below February 2020's 2.7% growth expectation when one-year ahead inflation expectations were 2.5%.

Expectations for finding a job also are falling, with the mean perceived probability of securing new employment after losing a job falling to 48.8% in February from 49.5% in January.

  • While above its recent low of 46.2% in December, the number remains well below the February 2020 level of 58.7%.

The big picture: The Fed's survey suggests that Americans are expecting inflation to materially rise while their own financial situations lag behind.

Go deeper

27 mins ago - Health

CDC: Pfizer and Moderna boosters overwhelmingly prevent Omicron hospitalizations

Brian Cassella/Chicago Tribune/Tribune News Service via Getty Images

Booster doses of the Pfizer-BioNTech and Moderna vaccines overwhelmingly prevented hospitalizations from the Omicron variant, according to Center for Disease Control and Prevention data out Friday.

Driving the news: Pfizer and Moderna boosters were 90% effective at preventing Americans infected with the Omicron variant from ending up in the hospital, per the data.

Janet Yellen co-opts Reaganomics phrase for new Davos speech

Treasury Secretary Janet Yellen at a speech this week. Photo: Alex Wong/Getty Images

The U.S. needs to focus on increasing its productive potential, Treasury Secretary Janet Yellen will tell world leaders Friday, calling for what she terms "modern supply side economics."

Why it matters: She is co-opting a phrase traditionally used by political conservatives to describe low-tax and deregulatory policies — and framing the Biden administration's initiatives as the best path forward to achieve greater national prosperity.

Dan Primack, author of Pro Rata
2 hours ago - Economy & Business

Calling the startup valuation peak

Illustration: Annelise Capossela/Axios

Anyone who's called a private market peak over the last decade, or even suggested that air was leaking out of the balloon, has been swiftly humbled. "Nothing matters" has consistently proven to be the only thing that matters.

Our thought bubble: The go-go era is history, even if the economy and new company formations remain strong.